BRIDGE (5)
The biennial World Bridge Championships have been going on for the past two weeks in Veldhoven, the Netherlands. There are three competitions; the Bermuda Bowl (open), the Venice Cup (women) and the d'Orsi Bowl (seniors). In each competition, the 22 teams play round robin matches over 16 boards, 3 matches a day for a week. The top 8 teams then proceed to the knock-out stages, over 96 boards.
The powerhouses of world bridge are Italy and the United States. In the previous 39 editions of the Bermuda Bowl, the U.S. has won 18 times and Italy 14; not much room there for anyone else. Italy were champions in 2007 and the U.S. in 2009. Furthermore, although the U.S. were sending a new, young team to defend the title, Italy had four of their 2007 squad on the 6-man team, and were confident enough to be able to drop the world's number one ranked pair, Fantoni and Nunes.
As expected, Italy cruised through the round robin stage, finishing top, and then beat China in the quarter-finals. However, they then came unstuck in the semi-finals against a Dutch team playing out of their skins on home turf. A very close match resulted in a dead heat with 16 boards to play. In the final session, the Dutch bid and made two small slams, whereas the Italians with the same cards made the same twelve tricks, but had only bid game. 26 imps to Holland and the match.
In the final against the U.S., the Americans started well, and led after two sessions. However, the Dutch hauled them back and won comfortably in the end to record a second world title after their first in 1993. Congratulations to them.
In the women's competition, Indonesia surprised most pundits by staging huge comebacks to beat first the U.S. in the quarter-finals and then England in the semi-finals. Then they ran out of steam and lost easily in the final to France, the match stopping after 80 boards since the French were so far ahead.
However, the performance of the tournament belongs to the French seniors. Winners of the round robin section, and easy victors over Germany in the quarter-finals, they needed a 6-imp swing on the very last hand of the semi-final (a little part-score contract) to beat Poland by a third of an imp! Then, in a seesaw final against the U.S., they let a 44-imp lead at the halfway stage slip to a 9-imp deficit with 16 boards to play. But they dug deep and won a tense final session 33-19 for an overall victory by just 5 imps.
I watched some of the matches live on my Bridge Base computer programme (where you can also play with people from all over the world). Although the players are much better than me, it was reassuring to see that they also make mistakes from time to time. Though I suppose it is always easier to play the hand when you can see all four sets of cards!
Walter Blotscher
Monday, 31 October 2011
Sunday, 30 October 2011
THE EURO CRISIS
Notwithstanding politicians' understandable statements to the contrary, the most important thing to note about this week's "comprehensive package" to sort out the Euro crisis is that it is not a solution, merely yet another means of buying time. Personally, I do not think that this is a bad thing (see below). However, other commentators are demanding more red meat, so I can see why the plain paper package was wrapped up in bows and ribbons.
There are three elements to the plan, and all of them represent wishes rather than decisions. First, Greece's private sector creditors will accept a "voluntary" haircut (i.e. write-down) on their Greek bonds of 50%, rather than the 21% agreed as recently as July. The agreement has to be voluntary in order to avoid a ruling of default, which would trigger credit default swaps on Greek bonds and might well have nasty implications for the bonds of other Euro area countries. However, a default ruling might occur anyway (if someone's decision not to pay you back half of what they owe is not a default, then what is?) and some bondholders may not go along with it.
Secondly, European banks (both within and outside the Euro area) will have to increase their capital by around Euro106 billion, so that by June next year, they have a capital ratio - capital to assets - of 9%. The problem here is that there are two ways to increase a ratio. What Governments want is that the banks increase the numerator, by going out and raising fresh capital. But that may well be difficult in today's markets, not least because of point 1. The alternative is to shrink the denominator by liquidating assets. In simple terms, that means lending less, which is the last thing said Governments want.
Thirdly, the Euro440 billion European Financial Stability Facility, the means of helping Euro countries in difficulties, is to be beefed up. The problems here are twofold. First, most commentators say that it should go up to Euro2 trillion (we are now firmly in the world of trillions!), but the package only talks of Euro1 trillion. Secondly, this will not be done by Euro Governments' stumping up more resources, there is instead talk of "leveraging" the existing facility by treating it as a sort of insurance scheme. Apart from the difficult message that that gives ("isn't this the sort of smoke and mirrors operation that got us into the mess in the first place?"), nobody yet knows exactly how this will work. Officials are working round the clock in order to put together a framework in time for the G20 meeting in November.
So if this is not a comprehensive package but a wishlist, why do I nevertheless think that it is OK? The answer is that it buys time, which (as I have said before) is crucial in a financial crisis. Consider the position of a bank that has a mortgage to a householder, who (because they lose their job) suddenly can't service the payments. If the bank calls the mortgage, and sells the house, then it will incur a guaranteed loss today. Furthermore, that loss will never be made up, since the householder will incur a break-up of the family, sink into depression and never get a job again. Even worse, the sale of the house will drag down property values in the neighbourhood generally, possibly triggering other foreclosures, where the bank has a mortgage. Against that background, isn't it better for the bank to hang in there, accept the occasional payments that the householder makes, and hope that they find a job in due course when things look a bit better?
The householder in the Euro area is Greece, and the bank is the other Euro area Governments, in particular Germany. The strategy has been to keep Greece in its house (in the Euro), while it undertakes reforms (to make it more likely that it gets a job in the future) and waits until things get better. In that respect, the strategy has been successful. Greece has been going bust, and the Euro has been collapsing, since at least 2009; but it has not yet gone bust and the Euro has not yet collapsed. Sure, the Euro area has problems; but everyone has problems. Even China has problems.
In the meantime, the Euro area countries are slowly groping their way to the sorts of longer-term changes that will represent a real solution to the crisis, in particular some sort of fiscal transfer mechanism between Member States and the right of the European Central Bank to issue unlimited liquidity to Euro area Governments. Both happen at national level; but the first was stymied by Member States' unwillingness to give up control of fiscal policy when the Euro was established, and the latter by the ECB's own statutes. Moves to change this will inevitably be slow, partly because they require changes to the E.U.'s treaties, and everybody remembers the saga over the Lisbon Treaty; and partly because the changes will have a major impact on E.U. countries (notably the U.K.) that are outside the Euro area, deeply affected by its decisions, but unable to influence them. If anybody had called for these changes two years ago, then the answer would have been a flat no. Sometimes things have to get worse before people accept the means to make them better.
German Chancellor Angela Merkel, who is leading on this issue, is often criticised as a bit of a tortoise when compared to some of the political hares in the European forest. But we should remember that the tortoise won the race in the end. To mix my metaphors, I think that up to now, she has played her hand with some skill.
Walter Blotscher
Notwithstanding politicians' understandable statements to the contrary, the most important thing to note about this week's "comprehensive package" to sort out the Euro crisis is that it is not a solution, merely yet another means of buying time. Personally, I do not think that this is a bad thing (see below). However, other commentators are demanding more red meat, so I can see why the plain paper package was wrapped up in bows and ribbons.
There are three elements to the plan, and all of them represent wishes rather than decisions. First, Greece's private sector creditors will accept a "voluntary" haircut (i.e. write-down) on their Greek bonds of 50%, rather than the 21% agreed as recently as July. The agreement has to be voluntary in order to avoid a ruling of default, which would trigger credit default swaps on Greek bonds and might well have nasty implications for the bonds of other Euro area countries. However, a default ruling might occur anyway (if someone's decision not to pay you back half of what they owe is not a default, then what is?) and some bondholders may not go along with it.
Secondly, European banks (both within and outside the Euro area) will have to increase their capital by around Euro106 billion, so that by June next year, they have a capital ratio - capital to assets - of 9%. The problem here is that there are two ways to increase a ratio. What Governments want is that the banks increase the numerator, by going out and raising fresh capital. But that may well be difficult in today's markets, not least because of point 1. The alternative is to shrink the denominator by liquidating assets. In simple terms, that means lending less, which is the last thing said Governments want.
Thirdly, the Euro440 billion European Financial Stability Facility, the means of helping Euro countries in difficulties, is to be beefed up. The problems here are twofold. First, most commentators say that it should go up to Euro2 trillion (we are now firmly in the world of trillions!), but the package only talks of Euro1 trillion. Secondly, this will not be done by Euro Governments' stumping up more resources, there is instead talk of "leveraging" the existing facility by treating it as a sort of insurance scheme. Apart from the difficult message that that gives ("isn't this the sort of smoke and mirrors operation that got us into the mess in the first place?"), nobody yet knows exactly how this will work. Officials are working round the clock in order to put together a framework in time for the G20 meeting in November.
So if this is not a comprehensive package but a wishlist, why do I nevertheless think that it is OK? The answer is that it buys time, which (as I have said before) is crucial in a financial crisis. Consider the position of a bank that has a mortgage to a householder, who (because they lose their job) suddenly can't service the payments. If the bank calls the mortgage, and sells the house, then it will incur a guaranteed loss today. Furthermore, that loss will never be made up, since the householder will incur a break-up of the family, sink into depression and never get a job again. Even worse, the sale of the house will drag down property values in the neighbourhood generally, possibly triggering other foreclosures, where the bank has a mortgage. Against that background, isn't it better for the bank to hang in there, accept the occasional payments that the householder makes, and hope that they find a job in due course when things look a bit better?
The householder in the Euro area is Greece, and the bank is the other Euro area Governments, in particular Germany. The strategy has been to keep Greece in its house (in the Euro), while it undertakes reforms (to make it more likely that it gets a job in the future) and waits until things get better. In that respect, the strategy has been successful. Greece has been going bust, and the Euro has been collapsing, since at least 2009; but it has not yet gone bust and the Euro has not yet collapsed. Sure, the Euro area has problems; but everyone has problems. Even China has problems.
In the meantime, the Euro area countries are slowly groping their way to the sorts of longer-term changes that will represent a real solution to the crisis, in particular some sort of fiscal transfer mechanism between Member States and the right of the European Central Bank to issue unlimited liquidity to Euro area Governments. Both happen at national level; but the first was stymied by Member States' unwillingness to give up control of fiscal policy when the Euro was established, and the latter by the ECB's own statutes. Moves to change this will inevitably be slow, partly because they require changes to the E.U.'s treaties, and everybody remembers the saga over the Lisbon Treaty; and partly because the changes will have a major impact on E.U. countries (notably the U.K.) that are outside the Euro area, deeply affected by its decisions, but unable to influence them. If anybody had called for these changes two years ago, then the answer would have been a flat no. Sometimes things have to get worse before people accept the means to make them better.
German Chancellor Angela Merkel, who is leading on this issue, is often criticised as a bit of a tortoise when compared to some of the political hares in the European forest. But we should remember that the tortoise won the race in the end. To mix my metaphors, I think that up to now, she has played her hand with some skill.
Walter Blotscher
Friday, 28 October 2011
THE LOCAL CINEMA (4)
I was the projectionist this evening at the local cinema. Columbiana. Not the greatest of films, but easy on the eye.
Some good news. We have managed to raise the kr.500.000 we need in order to upgrade our equipment so that we can show digital films; and this morning I ordered it. It will be installed in the week before Christmas, so we can go live at the beginning of January. It should give us a real boost.
Walter Blotscher
I was the projectionist this evening at the local cinema. Columbiana. Not the greatest of films, but easy on the eye.
Some good news. We have managed to raise the kr.500.000 we need in order to upgrade our equipment so that we can show digital films; and this morning I ordered it. It will be installed in the week before Christmas, so we can go live at the beginning of January. It should give us a real boost.
Walter Blotscher
Thursday, 27 October 2011
DIGGING (2)
I am halfway across the barn, and have laid new pipes that stretch that far. So today I filled in the big trench that I had previously dug. When that's done, I can start doing exactly the same with the other half.
During the 1930's, the great economist John Maynard Keynes was very exercised with the idea of paying workers to dig holes and then fill them up again. All I have got to do now is find someone to pay me.
Walter Blotscher
I am halfway across the barn, and have laid new pipes that stretch that far. So today I filled in the big trench that I had previously dug. When that's done, I can start doing exactly the same with the other half.
During the 1930's, the great economist John Maynard Keynes was very exercised with the idea of paying workers to dig holes and then fill them up again. All I have got to do now is find someone to pay me.
Walter Blotscher
Wednesday, 26 October 2011
BICYCLE THEFT
Virtually everybody in Denmark owns a bicycle. It's a very bike-friendly country, with lots of cycle paths, traffic lights and other infrastructure. Many people in the big cities commute to work on their bike. And in rural areas, people cycle to the bus stop and leave their bike there in special bike racks, ready for when they come back again.
If everybody already owns a bike, then what is the point in stealing one? But stolen they are. Last year the police recorded more than 71,000 bicycle thefts, which cost the insurance industry more than kr.200 million. Yet almost nobody ever gets caught or prosecuted for the offence. There were less than 300 convictions in 2010, a clean-up rate of just 0.39%. The police admit that it is not one of their highest priorities, and who can blame them?
That still leaves the question of what happens to all these bikes. My guess is that they are hoovered up and taken out of the country. But I have no way of knowing.
Walter Blotscher
Virtually everybody in Denmark owns a bicycle. It's a very bike-friendly country, with lots of cycle paths, traffic lights and other infrastructure. Many people in the big cities commute to work on their bike. And in rural areas, people cycle to the bus stop and leave their bike there in special bike racks, ready for when they come back again.
If everybody already owns a bike, then what is the point in stealing one? But stolen they are. Last year the police recorded more than 71,000 bicycle thefts, which cost the insurance industry more than kr.200 million. Yet almost nobody ever gets caught or prosecuted for the offence. There were less than 300 convictions in 2010, a clean-up rate of just 0.39%. The police admit that it is not one of their highest priorities, and who can blame them?
That still leaves the question of what happens to all these bikes. My guess is that they are hoovered up and taken out of the country. But I have no way of knowing.
Walter Blotscher
Tuesday, 25 October 2011
U.K. HOUSING POLICY
The U.K. is - compared with (say) Denmark - a very crowded place. Or, at least, Southern England is. And the problem is going to get worse. The largest country in the E.U. at the moment is Germany, whose population is old and shrinking. By 2050 it is expected to have been overtaken by the U.K., the biggest proportion of whose citizens live in Southern England.
Where will all of those people live? The number of new homes built in 2010 was a mere 134,000. That is not only the lowest figure since the Second World War, but a lot less than the 234,000 new households being formed each year. So not only is there a problem, but it seems to be getting worse.
Basically, there are four "solutions" to this problem, and none of them are easy. The first is to restrict the number of immigrants, who will be responsible for a fair chunk of the forthcoming increase in population. However, as well as not being easy to control (net immigration, the figure that matters, is the difference between two rather large numbers, namely immigration and emigration), it would almost certainly be illegal (if the immigrant were from the E.U.) and undesirable (if the immigrant were highly qualified and came from anywhere else).
The second is to increase supply, by building lots more homes. Builders and developers would love to do this, and they seem to have managed to have bent the Government's ear to their point of view. The proposed changes to the planning laws, which are currently wending their way through Parliament, put a "presumption" in favour of development, which opens up the possibility of scarce land being turned into building sites, particularly in suburban and rural areas. Not surprisingly, this proposal is being furiously opposed by all sorts of groups who fear that the countryside will be concreted over in the same way that Japan (another crowded island) already has been.
The naysayers do have a point beyond rural nimbyism. That is because although there is an acute housing shortage, there are at the same time nearly 1 million empty homes, of which around 350,000 have been empty for more than 6 months. There are lots of reasons for a home being empty, ranging from going on holiday to being evicted for non-payment of the mortgage. But the third option is to find a way to bring some of these houses onto the market through a mix of carrots (eg tax breaks for renovating) and sticks (eg banning second homes in some areas).
The fourth option is to change the way the population lives. Children could live with their parents for longer, as they do in southern Europe; or elderly people could move out of large properties when their children have left home and downsize to something smaller. However, although in some ways eminently sensible, it is notoriously difficult for Governments to change "lifestyle habits" by decree.
Since none of the solutions is really a solution on its own, existing and future British Governments will probably try to do a mix of all four. Expect some measures to restrict immigration, easier planning laws, tax breaks for renovating old properties and changes to the inheritance tax laws to encourage old people to sell early. And then sit back and listen to the howls of protest from disaffected groups. This is not a problem that is going to get solved in my lifetime.
Walter Blotscher
The U.K. is - compared with (say) Denmark - a very crowded place. Or, at least, Southern England is. And the problem is going to get worse. The largest country in the E.U. at the moment is Germany, whose population is old and shrinking. By 2050 it is expected to have been overtaken by the U.K., the biggest proportion of whose citizens live in Southern England.
Where will all of those people live? The number of new homes built in 2010 was a mere 134,000. That is not only the lowest figure since the Second World War, but a lot less than the 234,000 new households being formed each year. So not only is there a problem, but it seems to be getting worse.
Basically, there are four "solutions" to this problem, and none of them are easy. The first is to restrict the number of immigrants, who will be responsible for a fair chunk of the forthcoming increase in population. However, as well as not being easy to control (net immigration, the figure that matters, is the difference between two rather large numbers, namely immigration and emigration), it would almost certainly be illegal (if the immigrant were from the E.U.) and undesirable (if the immigrant were highly qualified and came from anywhere else).
The second is to increase supply, by building lots more homes. Builders and developers would love to do this, and they seem to have managed to have bent the Government's ear to their point of view. The proposed changes to the planning laws, which are currently wending their way through Parliament, put a "presumption" in favour of development, which opens up the possibility of scarce land being turned into building sites, particularly in suburban and rural areas. Not surprisingly, this proposal is being furiously opposed by all sorts of groups who fear that the countryside will be concreted over in the same way that Japan (another crowded island) already has been.
The naysayers do have a point beyond rural nimbyism. That is because although there is an acute housing shortage, there are at the same time nearly 1 million empty homes, of which around 350,000 have been empty for more than 6 months. There are lots of reasons for a home being empty, ranging from going on holiday to being evicted for non-payment of the mortgage. But the third option is to find a way to bring some of these houses onto the market through a mix of carrots (eg tax breaks for renovating) and sticks (eg banning second homes in some areas).
The fourth option is to change the way the population lives. Children could live with their parents for longer, as they do in southern Europe; or elderly people could move out of large properties when their children have left home and downsize to something smaller. However, although in some ways eminently sensible, it is notoriously difficult for Governments to change "lifestyle habits" by decree.
Since none of the solutions is really a solution on its own, existing and future British Governments will probably try to do a mix of all four. Expect some measures to restrict immigration, easier planning laws, tax breaks for renovating old properties and changes to the inheritance tax laws to encourage old people to sell early. And then sit back and listen to the howls of protest from disaffected groups. This is not a problem that is going to get solved in my lifetime.
Walter Blotscher
Monday, 24 October 2011
THE RUGBY WORLD CUP (2)
Perennial favourites New Zealand finally won the rugby world cup yesterday for the first time since the inaugural one in 1987. Like then, it took place against France in front of an adoring home crowd at Eden Park, Auckland, a place where they are almost invincible.
Yet it was a damn close-run thing, reflected in the 8-7 victory score. Indeed, if France had kicked an (admittedly very long) penalty with 16 minutes remaining, then one of the greatest ever upsets might well have happened.
France were a revelation. While New Zealand had romped through their pool matches, defeating France by 20 points along the way, and then comprehensively beating first Argentina and then Australia in the knock-out stages, les Bleus had seemed all at sea. Not only had they lost to New Zealand in their pool match, but they were also defeated by minnows Tonga. In the quarter-finals, they soundly beat a very unimpressive England, but then only scraped through to the final by beating Wales 9-8 in the semi-final, a game they should have lost by some distance, if only Wales had found their kicking boots. Going into the final, New Zealand were the odds-on favourites.
The only people who didn't seem to agree with that judgement were the French. After falling 8-0 behind, they scored a converted try with 30 minutes remaining, and then piled on the pressure. In the end, it was New Zealand's defence that won the day, since France had the better of both possession and territory (55 to 45).
And so the cup returns to the country for whom rugby is almost a religion. France, losing finalists for the third time, will be left to rue what might have been, their only consolation being the award of player of the year to their captain and tryscorer Thierry Dusautoir.
Walter Blotscher
Perennial favourites New Zealand finally won the rugby world cup yesterday for the first time since the inaugural one in 1987. Like then, it took place against France in front of an adoring home crowd at Eden Park, Auckland, a place where they are almost invincible.
Yet it was a damn close-run thing, reflected in the 8-7 victory score. Indeed, if France had kicked an (admittedly very long) penalty with 16 minutes remaining, then one of the greatest ever upsets might well have happened.
France were a revelation. While New Zealand had romped through their pool matches, defeating France by 20 points along the way, and then comprehensively beating first Argentina and then Australia in the knock-out stages, les Bleus had seemed all at sea. Not only had they lost to New Zealand in their pool match, but they were also defeated by minnows Tonga. In the quarter-finals, they soundly beat a very unimpressive England, but then only scraped through to the final by beating Wales 9-8 in the semi-final, a game they should have lost by some distance, if only Wales had found their kicking boots. Going into the final, New Zealand were the odds-on favourites.
The only people who didn't seem to agree with that judgement were the French. After falling 8-0 behind, they scored a converted try with 30 minutes remaining, and then piled on the pressure. In the end, it was New Zealand's defence that won the day, since France had the better of both possession and territory (55 to 45).
And so the cup returns to the country for whom rugby is almost a religion. France, losing finalists for the third time, will be left to rue what might have been, their only consolation being the award of player of the year to their captain and tryscorer Thierry Dusautoir.
Walter Blotscher
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